The Cost Driver That Is a Volume Based Cost Driver

question 8

Multiple Choice

The cost driver that is a volume based cost driver is:

• A) labour hours
• B) number of set-ups
• C) number of employees
• D) all are volume based cost drivers

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Definitions:

Cost Behavior

The way different types of production costs change when there is a change in level of production activity.

Contribution Margin

The difference between a company's sales revenue and its variable costs, indicating how much revenue contributes to covering fixed costs.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been subtracted from total revenues.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the proportion of fixed versus variable costs a company has.